P&G's Legendary Ex-CEO Explains Why Everyone Gets Strategy Wrong

Former P&G CEO A.G. Lafley was one of the most successful
executives in the history of the 176-year-old company. Under
Lafley, the company's value increased by more than $100 billion,
and more than doubled its roster of billion-dollar brands.

In his
upcoming book, "Playing To Win," which was co-written
with Rotman School Of Management Dean Roger Martin and was
released today, Lafley breaks down the strategic framework that
he used throughout his time at the top, which he says can be
applied to a company of any size.

There are countless books, articles, and courses on strategy. So
why do people continue to get it wrong? We spoke to Lafley, who
told Business Insider that there are three primary reasons.

Businesses and people don't like to make choices

"In Roger Martin's and my view,
the essence of strategy is making 5 integrated — sometimes
difficult — choices; so 5 choices to win. And a lot of us, a lot
of human beings, don't like to make choices, right? Choices are
difficult, we want to keep our options open, choices involve
taking risks, and not only risk to the business but personal
risk. So I think there's this sort of human resistance to making
choices, and choices are the core of strategy."

People don't like thinking
strategy, and focus on execution

"The second thing that goes on is I think that some people, maybe
too many people, at for-profit, not-for-profit, small, medium and
large businesses just don't like thinking strategy. They think
that they know what their product and service is, they think that
it's all about execution. 'If I execute better than the next guy,
I'm going to win.' But the problem is that execution without the
direction of a strategy, without the choices of a strategy, is
all over the place. You might win occasionally but you're
probably not going to win consistently, reliably or sustainably."

Companies go halfway and don't fully develop a
strategy

"This is probably most common at Fortune 500 companies. They do
part of the strategy job, but they don't do the whole thing. What
do I mean by that? They have a vision or a mission, they might go
out and do industry, company and competitor analysis, they
might even put together an annual plan and budget. Those are
parts of strategy, or they're the output of strategy but they're
not strategy."

So what's the solution? According to Lafley, it's about making
difficult and specific choices, and putting the entire weight of
a business behind them.

"Strategy is five choices,"
Lafley said. "What is winning; where am I going to play to win;
how am I going to win where I play; where are my core
competencies that are going to enable me to win where I play; and
what management systems and measures are going to help me execute
my strategies?"

Companies have to define an
ideal future in strategic terms, limit the field rather than try
to please everybody, decide on the best strategy for that market,
discover and use what they're best at, and determine how to
support and measure its people as they carry out the
strategy.

Especially in a large organization, that can't be done by
one person. It has to become a part of the culture and thinking
of the company.

"What we were really trying to accomplish at P&G was to
help our managers and leaders become better thinkers and better
doers, better strategists and better leaders," Lafley said. "The
last thing I wanted to do was sit in my office and try to make
strategy choices for 25 to 30 different industries in 90
different countries around the world. That made no sense, I
wasn't qualified to do it, I wasn't capable of doing it. So what
I wanted to do was help my managers and my leaders [who are]
responsible for those businesses, those geographies and those
brands, become better strategic choice-makers."

Strategy doesn't work unless everyone's aware of it,
working together, and willing to make tough choices to support
it.